Exhibit 10.5


 


ADVISORY SERVICES AGREEMENT


 


This Advisory
Services Agreement (this “Agreement”), dated as of July 1, 2004, is by and
between Alliance Gaming Corporation, a Nevada corporation (the “Company”), and
Kirkland Investment Corporation, a Delaware corporation (“Kirkland”).


 


BACKGROUND


 


The Company
and Kirkland are parties to a letter agreement, dated July 1, 1997, as amended
by an amendment thereto dated July 31, 1997 and an amendment thereto dated
January 4, 2000 (as amended, the “Letter Agreement”), pursuant to which
Kirkland has provided certain financial advisory services and related support
services to the Company.  Joel
Kirschbaum (“Kirschbaum”) owns 100% of the stock of Kirkland.  In addition, Kirschbaum is currently an
employee and a director of the Company, and has an employment agreement with
the Company.  The Letter Agreement and
Kirschbaum’s employment agreement with the Company expire on June 30, 2004.


 


The Company is
currently experiencing a period of rapid growth in an increasingly complex
multi-jurisdictional gaming industry which is dynamic and challenging.  In recognition of the industry experience
and experience with the Company possessed by Kirkland, the Company desires to
engage the services of Kirkland and Kirkland is willing to provide the
requested Services (as defined herein) pursuant to the terms and conditions of
this Agreement.  .


 


NOW,
THEREFORE, in consideration of the mutual covenants
and agreements set forth in this Agreement, and intending to be legally bound,
the parties agree as follows:


 


1.             Services.  


 


(a)           During the term of this
Agreement, as set forth in Section 3 hereof (the “Term”), Kirkland shall
provide the Company with such advisory and related services as the Company may
reasonably request from time to time which shall include, but not be limited
to, (the “Services”):


 


(i)            Providing analysis and
advice relating to (a) out-of-the ordinary transactions, including, but not
limited to, merger and acquisition transactions, which is contemplated to
include the type of research and analysis that is customarily undertaken, on a
summary or preliminary basis, by third-party investment banking firms, and (b)
capital structure, financing and refinancing transactions, application of
excess cash flow and working capital balances and similar matters.  Such advice is anticipated to include
reasoned, informed and detailed opinions and analysis, but is not contemplated
to include the level of comprehensive financial advisory work that would be
undertaken by an investment banking firm for significant transactions in the
absence of a specific engagement;


 


(ii)           Providing analysis,
advice and suggestions to senior management and the Alliance Gaming Board about
industry trends and business opportunities, including but not limited to joint
ventures, intellectual property and other licensing, investments, financing
commitments (e.g., funding Indian gaming ventures) and other strategic
transactions,


 

















 


including review of terms and
conditions, comparison to other similar transactions and recommendations as to
suggested courses of action;


 


(iii)          Maintaining on-going
general and specific industry experience and expertise, consistent with the
level currently provided, as a resource for both the Alliance Gaming Board and
senior management with particular emphasis on the application of this expertise
to actionable recommendations related to business strategy and development of
strategic alternatives;


 


(iv)          Providing the services
summarized in paragraph 1(a)(i) through 1(a)(iii) above on a proactive,
on-going basis.  Kirkland will also
provide financial and business advisory services and related services as the
Alliance Gaming Board and senior management may reasonably request from time to
time.


 


(b)           The Company, in its
sole discretion, may request Kirkland to work on a strategic financing and/or
M&A transaction with compensation as currently established and approved by
the Board of Directors on April 22, 2003.


 


2.             Compensation.


 


(a)           Annual Fee.  As compensation for the provision of the
Services provided pursuant to this Agreement, the Company shall pay to Kirkland
an annual fee of $600,000, to be paid in 12 monthly installments per year.  Each installment shall be due and paid in
advance by the first day of each month beginning July 1, 2004.


 


(b)           Business Expenses.  The Company shall reimburse Kirkland for all
reasonable and necessary out-of-pocket expenses incurred or paid by Kirkland
and its officers and employees which relate directly to the provision of
Services under this Agreement; provided, however, that any single expense item
in excess of $5,000 must be approved in advance by the Chief Executive Officer
or the Chief Financial Officer of the Company, which approval shall not be unreasonably
withheld or delayed.  Kirkland shall
provide appropriate supporting documentation for such expenses.  The Company shall pay Kirkland for such
expenses within thirty (30) days after receipt of an invoice for such
reimbursement.


 


3.             Term and Termination.


 


(a)           Term.  The Term of this Agreement shall be for a period of three and
one-half (3.5) years, commencing on July 1, 2004 and terminating on December
31, 2007 (the “Term”), unless earlier terminated as provided herein.


 


(b)           Termination.  This Agreement may be terminated prior to
expiration of the Term as follows:


 


(i)            By
Kirkland.  If Kirschbaum
voluntarily resigns from the Board, or otherwise provides the Company with
written notice of his voluntary termination of this Agreement prior to the
expiration of the Term, this Agreement shall terminate as of the date of such
resignation or termination, and the Company shall have no further obligations
to


 


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Kirkland or Kirschbaum or his
heirs or estates or its successors and assigns under this Agreement.


 


(ii)           By the
Company.  [a]  If the Board requests in writing that
Kirschbaum resign from the Board, or Kirschbaum is not re-nominated or having
been nominated is not re-elected to serve on the Board, or otherwise provides
Kirschbaum with written notice of termination of this Agreement, other than for
Cause (as herein defined) prior to the expiration of the Term, this Agreement
shall terminate as of the date of the Board’s request or notice.  In such circumstances, the Company shall pay
Kirkland the remainder, if any, of the fees due under Section 2(a) of this
Agreement for the remainder of the Term, to be paid in accordance with the
payment provisions set forth in such section. 
[b]  For purposes of this
Agreement, “Cause” shall mean (i) Kirkland’s or Kirschbaum’s willful and
continual failure to substantially perform its or his duties with the Company
(other than a failure resulting from Kirschbaum’s becoming Disabled) and such
failure continues for a period of thirty (30) days after its receipt of written
notice from the Company providing a reasonable description of the basis for the
determination that Kirkland has failed to perform its duties; (ii) Kirkland’s
or Kirschbaum’s conviction of a felony other than a conviction not disclosable
under the federal securities laws; (iii) Kirkland’s or Kirschbaum’s breach of
this Agreement in any material respect and such breach is not susceptible to
remedy or cure or has already materially damaged the Company, or such breach is
susceptible to remedy or cure and no such damage has occurred and such breach
is not cured or remedied reasonably promptly after Kirkland’s or Kirschbaum’s
receipt of written notice from the Company providing a reasonable description
of the breach; (iv) Kirkland’s or Kirschbaum’s failure to qualify (or having so
qualified being thereafter disqualified) under a suitability or licensing
requirement of any jurisdiction or regulatory authority that is material to the
Company and to which Kirkland or Kirschbaum may be subject by reason of its or
his position with the Company and its affiliates or subsidiaries; (v) the
Company’s having obtained from any source information with respect to Kirkland
or Kirschbaum or this Agreement that could reasonably be expected, in the
reasonable written opinion of both the Company and its outside counsel, to
jeopardize the gaming licenses, permits, or status of the Company or any of its
subsidiaries or affiliates with any gaming commission, board, or similar
regulatory or law enforcement authority; or (vi) conduct to the material detriment
of the Company that is dishonest, fraudulent, unlawful or grossly negligent or
which is not in compliance with the Company’s Code of Conduct or similar
applicable set of standards or conduct and business practices set forth in
writing and provided to Kirkland or Kirschbaum prior to such conduct and which
has a material detriment to the Company and is not susceptible to remedy or
cure by Kirkland or Kirschbaum, as the case may be.


 


(c)           By Death or
Disability.  If Kirschbaum dies
before the expiration of the Term, this Agreement shall terminate on the date
of his death.  If Kirschbaum becomes
disabled or incapacitated (“Disabled”) for any period of six (6) or more
consecutive months or for a non-continuous period aggregating to 26 weeks in
any twelve month period as a result of illness or incapacity before the
expiration of the Term, the Company shall have the right to terminate this
Agreement upon written notice to Kirschbaum. 
In the event Kirschbaum dies or becomes Disabled, and the Company
terminates the Agreement, the Company shall have no further obligations to
Kirkland or Kirschbaum or its or his heirs, estate, successors or assigns under
this Agreement.


 


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(d)           In the event that this
Agreement is terminated and Kirschbaum remains on the Board, he shall be
entitled to secure compensation on the same basis as other non-management
directors.


 


4.             Other Activities.  The Company explicitly acknowledges and
agrees that, during the Term,  Kirkland
and its officers and employees, including Kirschbaum, will also be engaged in a
variety of other substantial business activities that do not relate to the
business of the Company.


 


5.             Successors and
Assigns.  Neither this Agreement nor
any right or interest under it shall be assignable by either of Kirkland or the
Company without the prior written consent of the other; provided, however, that
Kirkland may assign its rights and interests hereunder to its parent or any
subsidiary entity without such prior written consent from the Company; and
provided, further, that the Company shall be obligated to cause the assignment
of this Agreement pursuant to a Change of Control, as set forth in Section 6
below.  This Agreement shall be binding
upon and inure to the benefit of the successors and permitted assigns of each
party.


 


6.             Change of Control.  Upon a Change of Control of the Company (as
defined below), the Company shall be obligated to cause any surviving or
successor entity to assume, be responsible for and honor Sections 2 and
3(b)(ii) of this Agreement.  For
purposes of this Agreement, a “Change of Control” means (a) the acquisition,
directly or indirectly, by any unaffiliated person, entity or group (a “Third
Party”) of beneficial ownership of 50% or greater of the combined voting power
of the Company’s then outstanding voting securities entitled to vote generally
in the election of directors; or (b) consummation of (i) a reorganization,
merger or consolidation of the Company, or (ii) a liquidation or dissolution of
the Company or (iii) a sale of all or substantially all of the assets of the
Company (whether such assets are held directly or indirectly) to a Third Party;
or (c) the individuals who as of the
date of this Agreement are members of the Board of Directors (together with any
directors elected or nominated by a majority of such individuals) cease for any
reason to constitute at least a majority of the members of the Board of
Directors; except that any event or transaction which would be a “Change
of Control” under clause (a) or (b)(i) or (iii) of this definition, shall
not be a change of control if persons who were the equity holders of the
Company immediately prior to such event or transaction (other than the acquiror
in the case of a reorganization, merger or consolidation), immediately
thereafter, beneficially own more than 50% of the combined voting power of the
Company’s or the reorganized, merged or consolidated company’s then outstanding
voting securities entitled to vote generally in the election of directors.


 


7.             Confidential
Information.  Kirkland recognizes
and acknowledges that it has had, and will have, during the Term, access to
certain Confidential Information (as defined below) of the Company and that
such information constitutes valuable, special and unique property of the
Company.  Kirkland agrees that it will
not, during or after the Term, disclose any of such Confidential Information to
any person or entity without the prior written consent of the Company, except
as necessary in the ordinary course of performing the Services hereunder or as
required by law, rule or regulation.


 


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(a)           “Confidential
Information” shall mean information that is not generally known to the public,
which is used, developed or obtained by the Company and/or any of its
affiliates, relating to its or their business and the businesses of its or
their clients, vendors or customers including, but not limited to: business and
marketing strategies, products or services; fees, costs and pricing structure;
marketing information; advertising and pricing strategies; analyses; reports;
computer software, including operating systems, applications and program
listings; flow charts; manuals and documentation; data bases; accounting and business
methods; hardware design; technology, inventions and new development and
methods, whether patentable or unpatentable and whether or not reduced to
practice; all copyrightable works; the Company’s or any of its affiliates’
existing and prospective clients, customers, and vendor lists and other data
related thereto; all trade secret information protected by the federal Economic
Espionage Act of 1996, 18 U.S.C. § 1831 et seq.; and all similar and related
information in whatever form.


 


(b)           “Confidential Information”
shall not include any information that has been published in a form generally
available to the public prior to the date upon which Kirkland proposes to
disclose such information.  Information
shall not be deemed to have been published merely because individual portions
of the information have been separately published, but only if all the material
features comprising such information have been published in combination.


 


8.             Covenant Not to Compete.  During Kirkland’s engagement under this
Agreement, and in the event of Kirkland’s termination pursuant to paragraph
3(b)(ii) hereof, during the period the Company is obligated to pay Kirkland the
remainder of its fees due under Section 2(a) of this Agreement, Kirkland shall
not become employed by, act as a consultant for, contract with, obtain a
beneficial ownership interest in or otherwise enter into any form of business
relationship with International Game Technology, Inc., WMS Industries, Inc.,
Shuffle Master, Inc., Aristocrat Leisure, Ltd., Gtech Holdings Corp.,
Multimedia Games, Inc., Sigma Game Inc., or any of their present and future
subsidiaries, divisions, parent companies and successors (“Peer Group”).  The provisions of this Section 8 shall not
prevent Kirkland from investing its assets in such form and manner as it
chooses; provided, however, that Kirkland shall not have any interest, direct
or indirect (other than through the Company or its subsidiaries), financial or
otherwise, in any member of the Peer Group unless such interest has been approved
by the Compensation Committee or such interest is, or arises solely from
ownership of, less than three percent (3%) of the outstanding capital stock of
such member and such capital stock is available to the general public through
trading on any national, regional or over-the-counter securities market..


 


9.             Notices.  Notices and all other communications
provided for in this Agreement shall be in writing and shall be deemed to have
been duly given (a) when delivered, if sent by facsimile, with confirmation
received, or by hand delivery, (b) one business day after


 


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sending, if sent by a national overnight
delivery service, such as Fed Ex, or (c) three business days after being
mailed, if sent by United States certified or registered mail, return receipt
requested and postage prepaid to the addresses set forth below:


 




	
  If to the Company:

  	
   

  	
  If to Kirkland:

  
	
   

  	
   

  	
   

  
	
  Alliance Gaming Corporation

  	
   

  	
  Kirkland Investment Corporation

  
	
  6601 South Bermuda Road

  	
   

  	
  527 Madison Avenue, 17th Floor

  
	
  Las Vegas, Nevada 89119

  	
   

  	
  New York, New York 10022

  
	
  Attention:  Chief Executive
  Officer

  	
   

  	
  Attention:

  
	
  (copy to)    General Counsel

  	
   

  	
   

  
	
  Facsimile:  (702) 270-7699

  	
   

  	
  Facsimile:  (212) 888-1253

  






 


10.           Entire Agreement.  This Agreement constitutes the entire
agreement between the parties and supersedes all prior agreements and
understandings, including, without limitation, the Letter Agreement, whether
written or oral, relating to the relationship between the Company and Kirkland.


 


11.           Modification.  This Agreement may not be modified or
amended except by an instrument in writing signed by Kirkland and the Company.


 


12.           Waiver.  Either party’s failure to enforce any
provision or provisions of this Agreement shall not in any way be construed as
a waiver of any such provision or provisions as to any future violations
thereof, nor prevent that party thereafter from enforcing each and every other
provision of this Agreement.


 


13.           Severability.  If, for any reason, any provision of this
Agreement is determined to be invalid or unenforceable, such invalidity or lack
of enforceability shall not affect any other provision of this Agreement not so
determined to be invalid or unenforceable, and each such provision shall, to
the full extent consistent with applicable law, continue in full force and
effect, irrespective of such invalid or unenforceable provision.


 


14.           Successors and
Assigns.  This Agreement is personal
to Kirkland and may not be transferred or assigned by Kirkland.  Neither this Agreement nor any interest
under it shall be assigned by the Company without the prior written consent of
Kirkland; provided, however, that the Company shall be obligated to cause the
assignment of this Agreement pursuant to a Change of Control, as set forth in
Section 6 hereof.  This Agreement shall
be binding upon and inure to the benefit of the heirs, estate, successors and
permitted assigns of each party.


 


15.           Governing Law.  This Agreement shall be governed by and
construed in accordance with the laws of the State of Nevada, without regard to
principles of conflicts of law.


 


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16.           Counterparts.  This Agreement may be executed in
counterparts, each of which when so executed and delivered shall be an original
and all of which taken together shall constitute but one and the same
instrument.


 


IN WITNESS WHEREOF,
the undersigned have executed this Agreement as of the day and year first above
written.


 


	
   

  	
  ALLIANCE GAMING CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  KIRKLAND INVESTMENT CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  FOR PURPOSES OF SECTIONS 3 AND 4

  HEREOF:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  JOEL KIRSCHBAUM

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
							



 


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